​Oil price plunges after ‘No’ vote in Greece, impending Iran deal

Oil prices fell 7 percent on Monday in the worst single-day decline in three months after Greece’s Sunday bailout referendum. Meanwhile, fears of oversupply have taken hold as Iran and world powers approach a nuclear deal.

The US benchmark oil price kept going down for the third session
in a row on the New York Mercantile Exchange, losing 7.7 percent
to close at $52.53 per barrel.

Brent crude, the global benchmark for oil prices, fell more than
5 percent on the London ICE Futures Exchange to close at $56.93.

Capital Economics lowered its year-end price forecast by more
than 8 percent, which puts US oil at $50 a barrel and Brent – at
$55.

The fall in oil prices is explained by a combination of factors,
such as uncertainty in the eurozone after the vote in Greece,
expectations of rising US oil production, the looming closure of
the Iran nuclear deal and decreasing demand for exported oil in
China.

“Even though Greece is a particularly small consumer of oil
(about 0.3 percent of the world’s total last year), it is the
risk of contagion and in a worse case, another recession in the
eurozone, which has weighed on oil prices,” Thomas Pugh,
commodities economist at Capital Economics, said.

61.31 percent of the Greek population backed the ‘No’ vote in the
referendum on whether to accept further austerity measures in
return for international financial aid on Sunday.

Last week, US oil drilling went up after 29 consecutive weeks of
declines, with the number of rigs increasing by 12 to 640.

The possibility of Iran and the world powers reaching a deal on
Tehran’s controversial nuclear program by Tuesday’s deadline also
raises fears of oversupply.

The agreement is likely to see sanctions lifted against Tehran,
with the Wall Street Journal reporting that the Iranian
authorities are planning to double oil exports to 2.3 million
barrels a day if it happens.

There are also doubts about China – the world’s second largest
consumer of oil – being able to maintain its demand after the
country’s markets plunged in recent weeks.

Chinese authorities are making active efforts to deal with the
situation, but if they fail, investors fear the economic growth
in China will slow down, leading to a decrease in oil imports.